The more things
change …
After 10 years in
business, AFM
director Iain Forbes
says the market has
changed but the
company has stayed
the course

T

en years has seen a lot of changes
in the mortgage industry. From
an environment with no real
regulation and strong demand, to an
industry still coming to grips with tight
controls and a new normal for credit
growth, the founders and directors of
Australian First Mortgage have
navigated one of the most tumultuous
periods in lending.
FULL STORY PAGE 14

A look at what’s been
making headlines
P4

+ ANALYSIS
BROKERS ON
AGGREGATORS

A breakdown of the
results from this year’s
MPA survey
P10

WINDS OF
CHANGE

QBE’s comprehensive
look at the state of the
mortgage market
P12

+ TOOLKIT
FAILING FOR
SUCCESS

The lessons we learn
from examining failure
P16

+ OPINION
YIELDS
MERGING

RP Data’s Craig
Mackenzie gives
investors some food
for thought
P18

+ CAUGHT ON CAMERA
PEPPER SPICES
THINGS UP
The specialist
lender takes its
show on the road
P29

“It ought to be expected
that rental yields will
continue to improve over
the coming months” P18

NEWS
4

brokernews.com.au
brokernews.com.au

Brokers’ likeliness
to leave aggregators
revealed
■ What percentage of the broker population do

you believe would like to change aggregator?
Are you among them? We asked brokers to say
how likely they are to change aggregators in the
next 12 months – and you may be surprised by the
survey results.
According to Australian Broker sister publication
MPA’s 2013 Brokers on Aggregators survey, only
8% of respondents considered themselves ‘extremely
likely’ to change aggregator in the next 12 months,
while 68% of respondents said that they were
‘extremely unlikely’ to do so.
The question asked of brokers who took part in
the survey was ‘how likely are you to change
aggregators in the next 12 months on a scale of one
(extremely unlikely) to five (extremely likely)’ and
the average score for all responses was a low 1.75.

THE PERCENTAGE BREAKDOWN
FOR ALL SCORES
Percentage of brokers likely to switch aggregators
in the next 12 months

68%

11%
8%

8%

Source: MPA

EXTREMELY
LIKELY

LIKELY

MAYBE

UNLIKELY

EXTREMELY UNLIKELY

5%

EDITOR Adam Smith

ASIC CLARIFIES LITIGATION POSITION

PUBLISHER
SIMON KERSLAKE

■ ASIC has released two new information sheets

describing the factors considered when deciding whether
or not to become involved in private litigation.
Information Sheet 180, ASIC’s approach to involvement
in private court proceedings, outlines the regulator’s
approach when deciding whether to become involved in
private proceedings. This includes intervening as a party, or
applying to appear as amicus curiae or ‘friend of the court’.
ASIC says decisions on whether to intervene are made
consistently along with decisions on whether to take
enforcement action and are based on:
• importance and impact of the matter from the
perspective of strategic regulatory significance;
• cost versus regulatory benefit, and
• available alternatives to intervention
ASIC Commissioner Greg Tanzer said the regulator
doesn’t “lightly intervene” in matters that are about
personal legal rights and remedies.
“But we will consider how best to act where there is a
broader regulatory benefit that may be achieved through
ASIC involvement.”

Big four the most profitable
banks in the world
■ Australia’s big four banks have

been ranked most profitable in the
world for the third year running,
according to Bank for International
Settlements (BIS) data.
Last year, the major lenders made
better returns than banks in 10 other
developed nations, including the
US, Britain and Europe – and total
profits this year are expected to
exceed $26bn.
BIS says pre-tax profits for the
majors were equal to 1.18% of their
total assets, putting Australian banks
ahead of other wealthy countries on
the list. According to News Ltd, only
lenders in the emerging economies of
Brazil, Russia, India and China are
making better returns.

COPY & FEATURES

DID YOU KNOW?

$76k

The approximate per
capita net wealth of
Australian’s
Source: ABS

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Copyright is reserved throughout. No part of this publication
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Australian Broker is the most-often read industry
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The research also found that brokers rate Australian Broker
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followed by sister publication MPA. Overall, on all categories,
Australian Broker ranks top followed by MPA. The results
were based on a sample of 405 respondents who were the
subject of telephone interviews.

free online home loan index – The Australian Lenders’ Index – which managing
director, John Kolenda, believes will be as useful to brokers as it will be to
their clients.
“If you look at the way home loans are currently assessed, the only measure
is really what interest rate is on offer,” said Kolenda. “Now, that only gives you
a very small insight into that lender and the product. The Australian Lenders’
Index provides you with information on interest rate fluctuation, how quickly
[lenders] drop interest rates when the RBA moves, how quickly they raise
interest rates, etc… it’s providing a lot more granular detail.”
However, while the site is aimed partly at the consumer, Kolenda hopes it will
be just as useful for brokers themselves.
“The broker can access the current information, like a consumer, on the site,
but they can also subscribe and that will provide them additional information
which will support them when they’re engaging in dialogue with their
customers. It will be a very powerful resource tool for both consumers and
mortgage brokers.”

STOP POINTING THE FINGER AT BROKERS

Brokers in the US are tired of acting as scapegoats for
the financial meltdown and shoddy lending practices,
an industry leader has said.
National Association of Independent Housing
Professionals (NAIHP) president Marc Savitt has said
that brokers remain under scrutiny and increasingly
tight regulation, while unfairly getting the blame for
much of America’s housing crisis.
“When it all happened, when everything came
crashing down, some of the big guys decided they would
find the scapegoat and go after the little guys that they
deemed couldn’t defend themselves,” Savitt said.
He urged those in and outside the industry to
consider that mortgage brokers did not and still do
not create loan products, determine the automated
underwriting systems used to approve borrowers,
underwrite the loan or approve borrowers for
the loans.
“It’s called the Dodd-Frank Wall Street Reform and
Consumer Protection Act,” Savitt said. “It’s not called
The Dodd Frank Mortgage Broker Act.”

HOUSING MARKET HITS ‘AWKWARD
TEENAGER’ PHASE

The US housing market made it to 61% “back to
normal” in May, according to the latest housing
barometer from Trulia.
May’s percentage is the first time the recovery has
passed 60% since the crash. April’s barometer was
54% and a year ago, the barometer was at only 35%.
“The recovery has reached full-fledged teenager
status, with awkward, sudden growth spurts and
parents – the Fed – who now threaten to take
away its allowance by winding down measures
that pushed mortgage rates down to historic
lows,” said Jed Kolko, chief economist
at Trulia.
“Before long, the recovery should make it
into adulthood, but it will face some grownup challenges in the next couple of years:
still-tight mortgage credit for many borrowers,
a slow jobs recovery for young adults, and
unaffordable housing in large coastal markets.”

CANADA
CANADIAN BROKER PROPOSES CLIENT
LOYALTY FEE

Brokers in Australia have long debated the idea of fee
for service, with some suggesting a “no-go” fee as a
compromise. One Canadian broker tired of doing all the
work and watching the client jump ship to a big bank is
echoing many of his Aussie cousins’ sentiments.
“How can we get clients to show loyalty?” asked Jim
Black, principal broker for Dominion Lending Centres
Mortgage Excellence in Lethbridge, Alberta. “We don’t
get paid until the deal is done. I’d estimate that
for $100m of committed deals we’ve done,
we’ve had another $30m–35m committed that
didn’t close and have gone to the bank.”
Black – who is frustrated by clients who
use his services for free only as a means to
gain leverage with the banks for a better
mortgage rate – is considering having clients
sign a broker agreement, an agreement that
would recognise and reimburse the broker for
all of this work.

DID YOU KNOW?

17
years

Customer
satisfaction
with the major
banks hit a
17-year high
in May
Source: Roy Morgan

Are brokers enabling
financial abusers?
■ Brokers could be

unintentionally enabling the
perpetrators of financial abuse,
say Acuity Funding managing
director, Ranjit Thambyrajah
and Australian Bankers’
Association (ABA) CEO, Steven
Münchenberg.
Studies suggest that
approximately 3–7% of people
over the age of 65 will experience
abuse from someone with whom
they have a relationship of trust,
with financial abuse identified as
the fastest growing type.
“Unfortunately,” said
Münchenberg, “a common cause
of financial abuse is where an
adult child has a false sense of
entitlement to their parents’
money or property… On reverse
mortgages specifically, we
understand that, since the GFC,
the supply-chain for these
products has been reduced to the
point where very few providers
remain active.”
Acuity Funding is one broking
group which refuses to offer
reverse mortgages, which
Thambyrajah said can be
“particularly tricky” when it
comes to clients taking financial

BROKERS HAVE
TO CONSIDER THE END
BORROWER WHEN
ASSESSING OR
SUBMITTING A LOAN
TO A LENDER
- R ANJIT THAMBYRAJAH

advantage of vulnerable
individuals.
“Brokers have to consider the
end borrower when assessing or
submitting a loan to a lender.”
However, while Thambyrajah
believes legislation must be
developed to protect vulnerable
individuals from financial
abuse, he said law-makers
need to be sure to keep the
regulations workable for both
brokers and borrowers.
“As with any form of
legislation, there needs to be care
given to ensure that the
legislation is not too punitive and
unworkable. It is also important
that current and future
legislation only protects those
who really need protection and
not those who wish to avoid
their financial responsibilities
when they default on their
financial obligations.”

NEWS

brokernews.com.au

8

Broker faces
imprisonment
following 10 charges

AGGREGATOR TEAMS UP WITH GLOBAL CONVEYANCER
■ Aggregator Port Group has announced a market-leading referring partnership

with conveyancing group Slater & Gordon Lawyers.
Port Group GM, Voula Kotsiras, said the deal is possibly the first of its kind
in Australia and was designed to explore “the mutual benefits of working more
closely” with the finance and real estate industries.
“It is exciting. I suppose it’s a bit out of the box and we don’t really know
where it’s going to go, but I think adding in another line of business to our
aggregation group will be great.”
Kotsiras said it is easy for brokers to limit their referral relationships to
financial planners and accountants, but says it may be time to start thinking
outside the square.
“You’ve got accountants that align with mortgage brokers, you’ve got financial
planners that align with mortgage brokers – and conveyancers are the other arm
that clients need. It’s a natural attrition, which is fantastic.
“It’s just thinking a little bit outside the square and having the courage to say,
‘yes, I’m going to partner with someone’. It doesn’t need to be the traditional
accounting or financial planning firm, it can be pretty much any professional
organisation you can work with and entrench yourself into as part of their
process. That’s what Port Group is trying to do with Slater & Gordon and I think
the results could potentially be quite lucrative for both.”

■ A former NSW-based mortgage broker has

pleaded guilty to 10 charges of providing false
loan applications to lenders over a six-month
period to secure approvals for home loans totalling
almost $3.8m.
Moustafa Dandachli, also known as Muzi
Dandachli, 31, of Georges Hall, supplied the
applications to two banks between July 2011 and
January 2012.
The applications, for 10 people, included loans
ranging from $196,000 to $640,000. Documents
included employment history, tax returns and
bank statements.

DID YOU KNOW?

LMI claims remain steady
■ LMI claims as a result of

mortgage default have stabilised
following a post-GFC increase
and fears of a forthcoming
economic slowdown in Australia.
QBE LMI CEO Jenny
Boddington told media at the
launch of the company’s annual
Mortgage Barometer report that
most claims were the result of
“life events”.
“A loan will go to claim usually
because of life events, such as
divorce or death,” she said. “A
couple of years ago, we did see
default rates increase because of

a slowdown in tourism and
hospitality especially. We’re not
seeing that getting worse – the
trend remains constant.”

69%

of first
homebuyers
worry that
they will never
be able to
afford their
own home
Source: ABE LMI
Mortgage Barometer

A LOAN WILL
GO TO CLAIM
USUALLY BECAUSE
OF LIFE EVENTS
- J ENNY BODDINGTON

DANDACHLI FACES A
MAXIMUM PENALTY OF TWO
YEARS IMPRISONMENT, A FINE OF
UP TO $11,000, OR BOTH
Dandachli appeared before Sydney’s Downing
Centre Local Court and admitted to providing the
documents knowing they were false or misleading.
He faces a maximum penalty of two years
imprisonment, a fine of up to $11,000, or
both, for each charge and will be
sentenced at a later date.
Dandachli was charged by ASIC under
section 33 of the NCCP Act 2009 while he
was engaging in credit activity on behalf
of his employer. Section 33 makes it an
offence for a person engaging in credit
activities to give false or misleading
information or documents to another
person where that person knows, or is
reckless as to whether such information
or documents are false or misleading.

$196,000
JENNY BODDINGTON

$3,800,000

ANALYSIS
10

brokernews.com.au

Delivering what
they promise?
Aggregators are working harder than ever to attract
and retain quality brokers, but how good a job are
they doing?

A

ggregators. Some brokers consider them little more than a
necessary evil, while others consider theirs to be valued
business partners. Some brokers want a high level of support
from their aggregators, while others want theirs to fade into
the background. Australian Broker’s sister publication, MPA,
recently polled brokers on the service aggregators were delivering.
Here’s a look at how the aggregators are performing.

ARE YOU CONCERNED ABOUT
THE SUSTAINABILITY OF YOUR
AGGREGATOR’S BUSINESS MODEL?

WHAT BROKERS THINK MATTERS IN AN AGGREGATOR’S
OFFERING (OUT OF 5)
4.51

A change in the air
The QBE LMI Mortgage Barometer has revealed the shifting trends of Australian
homebuyer sentiment

T

he QBE 2013 LMI Mortgage Barometer
has revealed a market in which demand for
property seems to be on the mend. Nearly
one in three Aussies (32%) believe the next
six months will be the best time to buy
property, and 47% say property values will increase
strongly in the next three years. With rates falling
and property prices having eased off, it seems
Aussies are giving housing another look. Hereâ&#x20AC;&#x2122;s a
glance at some of the reportâ&#x20AC;&#x2122;s findings.

BROKERS VERSUS BANKS
A look at why customers choose to go through brokers, or choose to go direct:

38%
Pass on only
some of the cut

19%
37%
16%
20%

Less paperwork

FAST FACT

52%

24%
31%

Helps understand
different options

If rates continue to drop, this is how borrowers expect
banks to respond:

of mortgage
seekers surveyed
consulted a
broker during
the home loan
process

Brokers

6%

Helps get a mortgage
tailored to needs

RATE EXPECTATIONS

Direct

22%

Prefer not to deal with
lenders/brokers

32%

Better deal

40%

Do the research for me

0%
51%
48%

More convenient

58%

Source: QBE LMI
Mortgage Barometer

REFINANCING TAPERS OFF

Proportion of those surveyed who refinanced within the last 12 months:

38% Pass on most of the cut
6% Pass on all of the cut
4% Pass on none of the cut

2012

17%

2013

13%

ANALYSIS
13

brokernews.com.au

BANKING ON THE BIG FOUR

MINIMUM PAYMENTS HEADING DOWN

The majors remain popular with homebuyers, with 62% choosing one of the big
four for their home loan. Here are some of the reasons:

Jun
2012

Sept
2012

Dec
2012

Source: QBE LMI
Mortgage Barometer

$2,633

$2,840

$2,812

Average minimum payment

23%

Better reputation

$2,686

They have the mortgage
that best suits my needs

Average minimum payment

34%

More than one in
five mortgagors
surveyed
said they had
struggled at
least a few times
in the last
12 months
to make their
minimum
mortgage
payment

56% of those surveyed say they will delay
purchasing until after the federal election

Dec
2011

Mar
2012

Survey date

NEWS
14

brokernews.com.au

CONTINUED FROM PAGE 1

AFM:

The more things change …
After 10 years in business, AFM director Iain Forbes
says the market has changed but the company has
stayed the course

B

ut just because the industry has seen a rapid
pace of change, that doesn’t mean AFM will
be blown about by the prevailing winds of the
day, director Iain Forbes has said. In navigating a
shifting environment for lenders, Forbes said it’s
important for the company to maintain the course it
set when it started a decade ago.
“We just continue to do what we are doing and we
have done, which is go out there and service
brokers. Brokers need an alternative. We are that
alternative. We see no reason why we should
change. We should continue to grow in the way that
we have grown,” Forbes said.
Key to this growth, managing director David
White said, has been AFM’s funding position.
While other mortgage managers have folded
through the GFC as their underlying funders put
them in an uncompetitive position, AFM was able
to hedge its bets by having a broad base of funding.
“When we first started the business, we had
three funding options straightaway. The idea was to
have flexibility in funders, but also not to be tied to
any one funder because if they changed their
pricing and commission structure we’d have to go
along with it, and that could put us out of the
market. We could be dictated to,” he said.
Instead, White said the lender made the decision
to put itself in a position whereby it could dictate its
own terms rather than be dictated to. Having a
variety of funders, White suggested, means the
funders are kept on their toes by one another.
“It also puts competition back onto our wholesale
funders to come up with something better,”
White said.
And the business’ decision to spread out its
funding base from the very beginning meant it
could also bring a more competitive proposition to
brokers, White said.
“The flexibility of AFM is the multitude of
funding lines we have, so we can chop and change
between funding lines and put out different
products and pricing while still keeping broker
commissions intact. Having flexibility of funders,

WE NEED TO ENSURE THE LONGEVITY
OF THE CHANNEL, SO WE DON’T WANT
OTHER MORTGAGE MANAGERS TO FOLD OR
GET TAINTED BY FRAUD
– TANYA WHITE

we can suit the market dependent on what funders
we have, and not be tied to any particular one.”

NAVIGATING THE CHALLENGES

But the commitment to staying the course hasn’t
come without challenges for AFM, White said. The
non-bank sector itself is still recovering from the
effects of the GFC, he argued.
“During the GFC, non-banks were tarnished as
bad lenders. We got thrown into that bucket, so
unfortunately we’ve had to fight our way out of
that,” he said.
Forbes agreed, and added that AFM’s reputation
was kept intact through the GFC by the strength of
the credit assessment processes it had put in place.
“The word ‘fraud’ is out there in a big way, but to
be honest, in 10 years we’ve never seen one. If you
look at delinquent accounts, we are better than
most other financial institutions,” he said.
Forbes pointed out that many smaller players
folded through this period, while AFM was able to
continue thriving. As for the future of the non-bank
sector, managing director Tanya White said it
behoves AFM for those players left in the non-bank
lending market to remain strong.
“We need to ensure the longevity of the channel,
so we don’t want other mortgage managers to fold
or get tainted by fraud. It’s important that the

NEWS
15

brokernews.com.au

DAVID WHITE, TANYA WHITE­AND IAIN FORBES

non-bank sector continues. It’s important that we
continue working with funders to get products that
we can sell, that are cutting edge and new age.
Without that, businesses like AFM wouldn’t exist,”
she said.

THE DECADE AHEAD

Having successfully navigated a turbulent 10 years,
though, Tanya White argued that the next 10 years
will bring its own challenges. Specifically, she said
regulations governing mortgage managers could
prove a hurdle for the sector as a whole. The
problem, White said, is that those setting the
regulatory agenda don’t understand the unique role
mortgage managers play in the market. Treasury
and ASIC and all the powers that be need to
understand mortgage managers better.
“They don’t really understand us. We sit in the
middle between banks and credit unions and the
other ADIs and the broker. Somewhere in there is
the mortgage manager,” she said.
Part of this misunderstanding, White said, is due
to the small number of legitimate mortgage
managers operating in the market. While she said
100–200 companies may self-identify as mortgage
managers, those who fit the true definition of a
mortgage manager may only number 20 or 30. And
White said that for those true mortgage managers

THE WORD ‘FRAUD’ IS OUT THERE IN A
BIG WAY, BUT TO BE HONEST, IN 10 YEARS
WE’VE NEVER SEEN ONE
– IAIN FORBES

sitting in the strange middle ground between brokers
and ADIs, regulations governing either side of the
mortgage industry spectrum are ill-fitting.
“The rules and guidelines they set for ADIs, do they
work for us? Or do they set the rules for brokers and
try to apply them to us? Both answers are no. What
you set for a broker doesn’t work for a mortgage
manager, and what you set for a deposit taking
institution doesn’t work either.”
So after 10 years of navigating the industry and
making a name for itself as one of the country’s largest
non-bank lenders, White said one of the primary
challenges remains helping the industry understand
the company’s unique position in the market.
“The industry needs to understand who we are.
They need to get what we do, and where we fit into
the equation.

TOOLBOX
16

brokernews.com.au

Taking a lesson from tanking
Watching others fail can cause us to feel empathy – or twisted
satisfaction – but Amy Rosenfeld points out that we should be
learning valuable lessons

I

t’s good to learn from your mistakes, but
sometimes it’s even better to learn from the
mistakes of others. Business strategy expert
Michael McQueen looks at five key lessons
brokers can learn from the businesses that
didn’t make it.

FAILURE IS ALWAYS AN OPTION

CULTURES LACKING
DIVERSITY WEAKEN AN
ORGANISATION OVER TIME

1. DON’T TRUST THE NUMBERS

Traditional indicators of business health can be as
dangerous as they are useful, says McQueen.
As “lagging indicators” they can give the
impression that a business is in fine health, while
recent decisions have begun to push it down the
path of failure.
Kodak, says McQueen, “was still a darling of
Wall Street long after it had begun to lose the
digital war”.
“It is possible to be on the brink of obsolescence
and have absolutely no idea at all. Further still, by
the time the numbers indicate that there is
something wrong, it may be too late to do anything
about it.”

2. SHIFT HAPPENS

“Whether it is changes in technology, competitive
dynamics, legislation or demography, fundamental
shifts have caused scores of previously successful
businesses to falter in recent years,” says McQueen.
For mortgage brokers, factors such as the
growing digital lending market and diversification
are shifts that brokers need to understand and
adapt to to keep up with an ever-changing market.

3. THE MOMENT YOU THINK YOU’VE MADE IT,
YOU’VE PASSED IT

“A key factor in almost every case of corporate
demise is a dynamic I call the Intoxication of
Success,” says McQueen.
“Put simply, this phenomenon describes the way
in which enduring success leads to a toxic blend of
complacency, conceit and closed-mindedness within
organisations that blinds leaders to potential
opportunities and threats.”

4. GREAT MINDS DON’T NECESSARILY THINK ALIKE

If your brokers are disagreeing with you, you’re
doing something right, says McQueen.
“A dangerous dynamic unfolds when a
homogenous culture grows within an organisation
to the point where new points of view are silenced
or shunned,” says McQueen.
In the case of failed car company Daewoo, six in
10 of the company’s senior management graduated
from the same university, and almost a third
graduated from the same high school.
“In the same way that in-breeding results in
weaker genetic strains, cultures lacking diversity
weaken an organisation over time.”

5. INNOVATION HAS A DARK SIDE

“Although innovation may be the buzzword of our
time,” says McQueen. “Very few acknowledge the
fact that sometimes over-innovating is as dangerous
as inertia.”
Trying to do too many things at once can lead to
a loss of focus, says McQueen.
As Steve Jobs once said: “People think focus
means saying yes to the thing you’ve got to focus on.
But that’s not what it means at all… Innovation is
saying no to 1,000 things.”

INDUSTRY CONSULTANT AND
CREDITED FOUNDER KYM
DALTON ON WHAT WE LEARN
FROM OUR OWN MISTAKES
Increasingly one hears the
term “Failure is not an option”.
Disagree. Failure is always and
always should be, an option. We
should get Gordon Gekko back for
an encore. Failure, for the want
of a better word is good; failure
works. Perhaps we should think
about a market in failure options?
Failure options that give one the
right, but not the obligation to
fail. Failure options that should
be exercised when the cost of not
failing is greater than the cost
of failing. Not failing requires
certainty. When the optionality of
failure approaches zero, then the
coefficient of certainty increases
to approach infinity. As we
approach infinity time slows down
until a state of inertia exists.
Perfect certainty therefore carries
the very real risk that nothing
will happen at all. So we really
need to get busy and get those
failure options out there for those
cold and timid souls who really
believe that failure isn’t an option,
but want the benefits of the
option to fail – vitality, innovation,
change, progress, lack of inertia.
I admit failure options are going
to be difficult to price. Maybe,
therefore, the option to fail is
actually priceless?

KYM DALTON

AXE TO GRIND

brokernews.com.au

17

A life vest for loan shortfalls
Clean Credit’s John Dickinson says a
loan shortfall isn’t the end of the road for
a client’s application

T

alking with many
mortgage brokers, we
are fully aware of the
problems with loan
shortfalls. Not being
able to consolidate a client’s
finances can often spell disaster
for a loan application and can
be very disappointing for both
the client and broker alike.
The reasons for loan
shortfalls are varied. However,
borrowing capacity and
disappointing valuations are
the main culprits. In the case of
a debt consolidation the purpose
of the facility is to amalgamate
the client’s debts into one
manageable facility. If all the

debts cannot be incorporated it
can somewhat defeat the
purpose of the refinance in the
eyes of the client; this is
particularly relevant if some of
the debts are in arrears.
Many situations will require
that all the client’s debts are
covered in the refinance in order
to give the incoming lender
comfort that their facility will be
serviced and they are providing
a benefit to the client. If the
maximum loan available does
not allow for this the transaction
will most likely not proceed.
The good news is that in
many cases loan shortfalls can
be dealt with using effective

debt negotiation.
Unsecured creditors are
aware of their often exposed
position and, given the right
approach, they will consider a
reduced payout in order to
allow a refinance to take place,
particularly if a loan is
currently in arrears.
Imagine a credit card
provider that is owed money on
an account that is delinquent.
While they do have the ability
to commence recovery action,
the reality is they are exposed
and they will typically consider
a settlement offer rather than
enforce proceedings against
a client.
Please don’t think I’m in any
way trying to deny anyone
collecting what that are owed.
On the contrary! Effective debt
mediation is about helping credit
providers recover the maximum
amount possible and escape from

what may end up being a far
worse situation for them at a
later date. In my experience
most credit providers are
thankful to be given this option.
Credit providers who are
approached to reduce a payout
figure will require a
comprehensive submission
covering the client’s overall
position, and most importantly
why they should consider
reducing their debt. Given the
matter is presented in the
correct fashion and the credit
provider is interacted with in a
respectful manner, you may be
surprised at what can be
accomplished.
I have witnessed discounts of
up to 80% in certain situations.
The next time you are faced
with a loan shortfall take a close
look at the unsecured creditors
involved; you may just be able to
save the deal after all.

ecently, my colleague Tim Lawless,
RP Data’s research director, posted a
blog entitled ‘The Deconstruction and
Gradual Reconstruction of Rental
Yields in Australia’. In the blog, Tim
referred to the dwelling values and rents graph
set out below and commented that rental yields in
Australia had improved over the past five years as
a consequence of rents increasing by 27%, while
dwelling values had increased by only 10% across
the combined capital cities. The consequence of
rents outpacing dwelling value increases is of
course an improvement in rental yields.
At the top end of the scale, Darwin is continuing

WHAT IS
INTERESTING IS THE
DEGREE TO WHICH
RENTAL YIELDS AND
MORTGAGE INTEREST
RATES ARE NOW
CONVERGING

to record the highest gross yields of any capital
city, with rents increasing by over 10% during the
past 12 months. At the other end of the scale is
Melbourne, where houses are returning a gross
yield of just 3.7%, while units are providing a
higher 4.6% gross yield.
Notwithstanding the relative weakness in the
Melbourne market, the more important point to
note from the graph below, showing capital city
gross rental yields, is that all cities, excluding
Adelaide and Melbourne unit markets, are
currently returning at or above 5% gross rental
yields for units, and all but the Adelaide, Sydney
and Melbourne markets for detached houses are
returning yields at or above 4.5%.
In his blog, Tim makes the point that, with
vacancy rates remaining very low across most
capital cities, it is reasonable to expect further
upward pressure on weekly rents. Therefore
it ought to be expected that rental yields will
continue to improve over the coming months,
particularly in cities such as Brisbane, Perth
and Sydney where new dwellings have been in
short supply.
With over 1.2 million property investors in
Australia, there are two key questions an investor
should ask prior to investing in residential property.
These are:

4%

5%

6%

7%

In the 2010/11 tax year, these 1.2 million
investors made a net rental loss of approximately
$13bn. This is the difference between the gross rent
received from the property and the interest payable
on any associated loan.
What is interesting in today’s market is the
degree to which rental yields and mortgage interest
rates are now converging as a result of the
improvement in rental yields on the one hand and
lower mortgage interest rates on the other. Many
major financial institutions are now advertising
three-year fixed interest rates of 4.99%. As can
be observed from the graph, this interest rate is
below the current rental yields for units in all
capital city markets other than Adelaide and
Melbourne, and for houses in Darwin and Hobart.
With increased confidence in being able to cover
their interest costs over the next three years,
investors ought to have increased confidence in
investing in the property market. This is currently
evidenced by the fact that currently one in three
residential mortgage loans are for investment
purposes.
The fact that an increasing number of property
investors are able to potentially positively gear
their property investments, or at least cover their
servicing costs, supports the dynamics of continued
strong interest in property by Australian investors.

THE COALFACE

brokernews.com.au

19

The doctor is in
Kiran Thapa may be one of the most
qualified brokers in Australia, but that
doesn’t mean his path has always been easy

W

e’re going to go
out on a limb here
and say that
Sydney-based
broker Kiran Thapa
is probably more qualified than
any other broker in Australia.
With a Master’s degree in
Engineering Science, a PhD
in Finance, and a Diploma of
Financial Services (Financial
Planning), Thapa has done his
fair share of hard work, but
he says entering the mortgage
industry has been one of the
toughest roads yet.
“I was working as a civil
engineer for a local council in
Melbourne in 2007 when we went
through the GFC. Everyone was
talking about the finance

industry, and media coverage
was massive. This is when I
realised that the finance industry
is where I should be, because
everyone is linked with it.”
Thapa undertook a PhD in
Finance at the University of
Technology in Sydney and
established his own company,
CAPKON Investments.
“By noticing the demographic
changes happening as a result
of skilled migration, mortgage
broking drew my attention,” he
says. “However, I didn’t have
much information about the
industry and, as a result, no one
was willing to take me on board.
It actually took me two years to
find my way into the broking
business. It was a very painful
journey, but I never lost sight of it.”
Thapa says finance has always
been his passion, and that the
two areas actually have more in
common than you might think.
“I was teaching Engineering
Economics back in Nepal before
migrating to Australia. I also
did a lot of self-study about the
finance industry – I used to
spend around three hours every
day reading financial news!
Coming from engineering

definitely helped me, as
numerical [knowledge] is the core
of finance anyway.”
While Thapa takes clients from
all over Australia, he says the
majority are members of Sydney’s
growing Nepalese community,
and that young people who are
new to Australia make for some
of his best clients.
“Young migrants tend to have
a higher level of risk appetite and
are very confident about property
investments… Our approach is
to become the coordinator for
clients’ property purchase
projects. We help clients not only
with their home loans but also
with property research,
bargaining, inspection and
step-by-step guidance through
the whole process for free. We
liaise with all the stakeholders
involved so that the clients get
the best ever experience in such
a big decision. I admit that this
demands extra work, but at the
same time this also makes sure
that the deal is closed within a
very short time. I have noticed
that great relationships are built
up with clients when you walk
with them at every stage of their
investment decisions.”

MARKET TALK
20

brokernews.com.au

FIVE units to be wary of
For investors looking to buy a unit, here are five to avoid

F

or many young investors, units are
the logical choice. But if your clients
are looking for good returns, there are
five types of units they should be
cautious about.

1. AGEING APARTMENTS

Martin Schoeddert, director of Iris Property, says that older
apartments are possibly the best option for entry-level
investors looking to avoid risk, though he cautions investors
to be wary of what’s out there.
“You have to be really careful with a lot of the [unit blocks]
that were built in the late 1960s and early 1970s as a very, very
high percentage of them have got concrete cancer,” he warns.
“Make sure you get a really good look at the building inspection,
get a good look at the Section 70 certificate, and make sure –
and this is crucial to any unit investment – to have a really, really
good look at how much is in the administration and sinking fund,
so that you’re not getting hit with special levies.”
If you do get nailed with a special levy, you could be up for
thousands, which means your rental income will be headed
straight to the levy, completely bypassing your wallet.

2. SMALL APARTMENTS

Some experts warn against investors buying into studios or
one-bedroom apartments, suggesting that a smaller dwelling
may have less potential to add value and subsequently may
have limited capital growth.
They say the buyer market is also limited, which places
significant pressure on the apartment to achieve strong rental
returns. These rental returns are a cause for concern, says
Empire Property Portfolio CEO Chris Gray, who believes that
inflated per-person rental payments in smaller dwellings might
be too high to attract a sufficient pool of tenants.
“While one-bedroom and studio apartments cost less money
to buy, they can be typically more expensive per person to rent,
and that can limit the number of people who want to rent or buy
them,” he explains.
You should consider the demographics of the tenant market in
the area before deciding whether a smaller or larger apartment
is the way to go. Students based around university nodes and
short-term workers in major city areas are more likely to opt for
studio and one-bedroom apartments than tenants wanting to
live in family-dominated suburbs.

ONE

3. HIGH-RISE BLOCKS

When an asset’s value relies on its scarcity factor, the idea
of a sky-scratching high-rise seems to scream ‘risk’ from
all angles. Indeed, many experts suggest steering clear of
huge cookie-cutter unit blocks and instead opting for smaller
blocks with a smaller number of investors.
High-rise apartment blocks can limit opportunities for
investors as increased competition restricts resale potential and
rental demand. Your investment won’t be unique if there are
a few hundred identical products in the exact same block, all
competing for the same tenants and/or buyers.

4. PREMIUM PRICE

Prestige apartments are inherently risky investments.
Value-adding opportunities are dampened, the chances of
overcapitalising are high, and the top end is often the first to
go when the going gets tough.
An astronomical buy-in price means that rental amounts need
to fly to achieve even a moderate rental yield, and positive cash
flow is a distant dream for investors.
The higher strata levies associated with prestige properties
can also cut significantly into any gains. Increased insurance
premiums can also be a concern. Carolyn Majda, general
manager, insurance services, of Terri Scheer Insurance, says
the cost of the company’s Landlord Preferred Policy may
increase for owners of top-end apartments renting at more
than $1,000 a week. Schoeddert suggests that investors should
diversify their investments rather than pooling all their funds into
one $2m–$4m apartment. “Personally, I think it’s too risky;
I think there are better ways of property investing,” he says.

5. BOTTOM-FLOOR UNITS

Is any one level of an apartment block a riskier investment
option than another? Is top floor better than ground floor, or
is a middle-level apartment a safer bet?
Those in favour of ground-floor units argue that their position
places no constraint on the tenant market, whereas top-floor
apartments may cut out certain groups, such as those with
prams or wheelchairs and the elderly.
Those who barrack for the top floor, however, say that it
offers a more open feel as there is less chance of being built in
and overshadowed by surrounding buildings. Top-floor tenants
will also enjoy more privacy as their balconies are less likely to
stare straight into another building. In apartment blocks with
views the higher floors will obviously be favoured, which can be
a huge boost to the property’s value.

THREE

FIVE

FOUR

TWO

MARKET TALK
21

brokernews.com.au

What housing
bubble?
House prices unlikely to rise significantly
in year ahead, says Citi Research

T

he possibility of a
housing bubble in
the next 12 months
is slim, according to
a report published by
Citi Research in June.
While some economists have
predicted house price increases
based on auction clearance rates,
Citi’s research shows that once
global factors and debt
constraints are taken into
account, house prices are
unlikely to rise significantly.
“Our model suggests that
house price inflation may peak
at around 3% by March 2014
and prices could fall slightly
thereafter,” say Citi spokesmen
Paul Brennan and Joshua
Williamson.
“[The research] looks at the
impact of Chinese immigration,
a falling dollar, rate cuts and
a number of other scenarios.
Overall it says that a housing
market ‘bubble’ is not likely to
eventuate over our forecast
horizon even under the most
optimistic assumptions.”
Brennan and Williamson say
that, with the cash rate at record
low levels, some forecasts are for
prices to rise sharply, creating
financial stability risks.
“Forecasters point to auction
clearances that have surged
this year, which normally is a
precursor to rising real house
prices. House prices are already
rising rapidly in New Zealand,
where the rate-cutting cycle is
more mature than in Australia.
[But] our research suggests these
risks are overblown. A house
price model developed by our
colleague, Vivian Jiang, shows
that once global factors and
debt constraints are taken
into account, house prices are
unlikely to rise significantly. The
modelling shows that Chinese
immigration has a powerful effect
on house prices, as do Chinese
economic growth and the AUD.”
Looking ahead, the two say the
slowdown in Chinese growth and
fall in Chinese immigration into
Australia, the lower AUD and
the limited appetite for further

increases in loan size counter
the favourable effect on house
prices of low interest rates.
“Assuming no further rate
cut, the model suggests that
house price inflation may peak
at around 3% by March 2014
and prices could fall slightly
thereafter.”
However, in the longer term,
Brennan and Williamson say
there are potential downsides to
the Australian housing market.
“These include the lower
growth outlook in China,
slowdown of Chinese
immigration, and reduced
appetite for offshore capital
inflows associated with the
lower AUD as the mining boom
winds down.
“We expect the nominal house
price to peak in March 2014, by
which time it will have increased
by 3% from its current level.
However, we expect the slowdown
in China to flow through to the
Australian housing market
during 2014, causing downward
pressure on house prices.”

Railway suburbs
ripe for investment

BY THE
NUMBERS

42

The number
of Victorian
suburbs with a
median price in
excess of $1m
Source: Real Estate
Institute of Victoria

AUSSIE HOMES STILL PULLING PROFIT
Research by RP Data confirms that more than three
quarters of Aussie homes sold for a profit over the
March quarter, while roughly an eighth of resales
over this period transacted at a loss.
RP Data national research director Tim Lawless
says a lower interest rate environment appears to be
creating an increase in consumer confidence across
the property market.
“We’re now seeing a lot more activity around sales
compared with this time last year,” he says.
RP Data recorded 58,677 residential property
resales nationally over the first quarter. Of these,
12.7% recorded a gross loss from the original
purchase price.
Conversely, 87.3% of all March quarter resales
recorded a gross profit relative to their original
purchase price. The gross profit from these resales
equated to $9.6bn.
The regions experiencing the biggest losses were in
lifestyle locations such as Queensland’s Gold Coast.
Regional areas associated with the resources sector
reported much fewer resale losses.
However, Lawless admits that the time a property
was held was a factor. “The likelihood of making a
gross profit or loss is quite different based on the
length of time a property has been owned.”

Suburban units that are serviced by public rail
services are shaping up to be the new cash cow for
savvy real estate investors, according to the latest
findings from PRDnationwide’s research department.
Findings from the group’s Australian Railway
Suburbs Report show that across Australia railway
units typically present a more attractive investment
opportunity and deliver stronger rental yields than
properties that do not have ready access to rail
transport hubs.
Low vacancy rates ranging between 1.2% (Perth)
and 2.7% (Melbourne) in railway suburbs in Australian
metropolitan centres, and rental yields that are
‘consistently outperforming’ those of houses and unit
accommodation in non-rail suburbs, are prompting
investors to bargain hunt for properties within striking
distance of rail transport.
In particular, railway suburb units appear to be ideal
for cashed-up investors looking to buy and hold in the
Sydney and Brisbane markets, with affordable prices
and low vacancy rates an indication of the current
strength of the rental market.
“Investors snapping up properties in railway
suburbs in the west of Sydney are experiencing
rental yields of between 4.6% and 5.2%,” says
PRDnationwide director of research Aaron Maskrey.
“Similarly, houses in railway zones in Brisbane offer
a robust investment opportunity as they consistently
deliver higher rental yields whilst being no more
expensive to purchase than unit accommodation in
non-rail suburbs.”
The scenario is slightly different in the extremely
tight rental market in Perth, with units just nudging
out houses as the most appealing investment stock
through greater rental yields.
“Historically, Perth rail and non-rail localities
have experienced negligible price differences,” says
Maskrey. “However, we can see that investors are
buying into railway suburbs, with a noticeable 19.3%
increase in unit sales when compared to 12 months
ago. Outside of inner-city Perth to the north and
east, unit owners are pocketing rental returns that
are around 1% more lucrative than similar sized and
priced units in non-rail areas.”
In Melbourne, unit investments are not delivering
the higher rental yields seen in other capital cities,
with some localities to the north and the west of the
city actually being outperformed by non-rail suburbs.
Maskrey says the city is going through a transitional
phase in the unit market that’s seeing prices and
yields in both railway and non-railway suburbs remain
closely linked.
“Railway house stock in Melbourne consistently
maintains a higher price threshold so there are still
buy opportunities in the Victorian market.”

WORKSHOP
22

brokernews.com.au

Bringing

GEN

on board
Looking to engage with a new generation of
homebuyers? That means you may need to
engage a new generation of employees

A

s Gen Y increasingly looks to enter the
housing market, brokers are looking for
ways to remain relevant to a new
generation of buyers. And as the industry
ages, it’s becoming imperative to attract
an influx of young talent. With these goals in mind,
it seems inevitable that mortgage broking will turn
to Gen Y as its next wave of employees.
The common perception of Gen Y is that they are
lazy, apathetic and demanding with high
expectations. But is this really the case? The most
highly educated cohort to ever enter the workforce,
these 20- to 30-year-olds are actually driven,
technologically competent and focused, and they’re
looking for a challenge. That sounds like some ideal
employee traits.
By 2025 Gen Y will make up 75% of the world’s
workforce, so how can you attract, engage and
retain these workers?
“The recruiting process doesn’t need to be any
different, but it’s about not focusing on just one
avenue,” Maurice Fernandes from Ceridian says.
“You need to expand out to where Gen Y typically
hang out.”

The trust problem
One in two Generation Y members say they refuse to
talk to a financial adviser and even fewer ask family
members for budgeting and investment advice,
according to a survey carried out by superannuation
fund REST.
The online poll of 1,000 people aged 18-30 shows that,
while the popularly-dubbed ‘me’ generation knows
saving is a priority, respondents were worried about
money and may not be properly educated about
managing finances, both in the short term and for
longer term areas like saving for a property deposit.
Those working full-time are more likely to save for a
major event, such as a holiday or wedding, rather than
on a house.

GEN Y NEED TO SEE A CLEAR PATH TO
PROMOTION OR MOBILITY WITHIN THE
ORGANISATION AND THEY REALLY VALUE
GLOBAL CAREER OPPORTUNITIES
– M AURICE FERNANDES

When it comes to advertising and interviewing
it’s time to look past some of the traditional means,
and let go of outdated rules. The majority of young
people are job hunting through social media and
connections – they’re on Facebook, Twitter or
LinkedIn talking to their connections, not
necessarily sifting through job boards.
And, while the general rule is to focus on the role
you’re hiring for and not discuss the potential for
advancement, Gen Y tend to be focused on where
they can go and what the next challenge will be.
Give them specifics of what they need to achieve in
the job on offer, and in what timeframe, to get to the
next step.
“They need to see a clear path to promotion or
mobility within the organisation and they really
value international and global career
opportunities,” Fernandes says. “They do require
clear goals for the path they’re assigned to and with
that they require constant feedback and coaching
on how they’re doing,”
So once you have them, how do you keep them?
HR consultant Donna Morano, from Brown
Consulting, says Gen Y have a sense of confidence
(thanks to their praise-positive parents) that Gen X
and Baby Boomers lacked, which can be off-putting
if it’s not understood. They’re also very technology
focused and are used to immediate information –
hence the focus on instant and frequent feedback.
Another area of conflict comes from the fact that
Gen Y don’t have a focus on longevity. They’re likely
to change employers and even careers much more
often than their predecessors.

DID YOU KNOW?

75%
By 2025 Gen Y will
make up
of the world’s
workforce

75%

brokernews.com.au

“Loyalty for them is not necessarily the same
as it would be for their parents. It’s important to
engage them right from the start,” Morano says.
“You want to get them when they join you and keep
them interested.”
She suggested getting them involved in teamwork,
including opportunities to lead teams. As with
recruiting, Gen Y is always looking at the next step
so if you don’t keep up with their learning and
development you’re likely to lose their interest.

TOP TIPS:

1

ADVERTISE IN THE RIGHT PLACES

2

INCLUDE GEN Y COLLEAGUES IN THE INTERVIEW
PROCESS

3

KNOW WHAT THEY’RE LOOKING AT AND HOW
THEY’RE LOOKING

4

SHOW THEM THEIR OPTIONS

Shift your focus from newspapers and other traditional venues
for job ads. But even if you’re already up on Workopolis or
Monster, and you’re looking into Facebook jobs, it might
not be enough to find the top Gen Y candidates. Gen Y is
networking with friends and connections online, using those
relationships to find the right role for them.

Next time you’re sifting through resumes or sitting down to
an interview take a look around. Are all the people involved
over 35? You might find you get better results if you include
someone from the generation you’re trying to attract,
Fernandes said. They speak the same language and might
spot something you missed.

Many Gen Y candidates care deeply about their employer’s
CSR, sustainability and diversity – and they have the tools to
find out the details. Make sure your website, Facebook page
and Twitter feed meet the standard – an outdated look could
put off your future-facing candidates. Optimise your job site
for mobile technology too. Many Gen Y-ers are focused on
their phones when it comes to exploring job options.

Don’t play coy and simply focus on the role at hand. Lay
the possibilities out for your candidate. For example: If you
meet Goal A (within X timeframe) then you’ll be looking at
a promotion to Role B. While you’re working for us you’ll
get to train in a specialty area, work with these different
departments and within two years you can expect to have the
opportunity to move into any one of these roles… Gen Y want
to know they’re not just getting a job – they’re getting a varied
and interesting career.

23

FINANCIAL SERVICES
24

brokernews.com.au

Government called
on to manage
disasters better

S

ome of Australia’s
largest insurers
and bankers have
published a white
paper pushing a string
of recommendations to more
effectively manage natural
disasters.
The authoritative paper
compiled by a roundtable of IAG,
Munich Re, Westpac, Optus,
Investa, and the Australian Red
Cross states its “sustainable and
comprehensive” approach could
ultimately save lives, reduce
damage to property and vital
national infrastructure, and free
taxpayer money to spend on
essential public services.
The proposals champion safer
and more resilient communities,
warning that the cost of natural
disasters in Australia will rise
from $6.3bn to $23bn a year
by 2050.
The white paper states
that each year the Australian
government spends circa
$560m on post-disaster relief
and recovery, compared to an
estimated $50m on pre-disaster
resilience.
It highlights that a program
of resilience expenditure of
around $250m a year to 2050
would ultimately generate budget
savings of more than $12bn
and Australian government
expenditure on disaster response
could reduce by more than 50%.
The white paper recognises
there is a lot of “positive
resilience and disaster
management activity already
underway” but notes there is
an opportunity for the various
agencies involved, such as the
police, government departments

THE COST OF
NATURAL DISASTERS
IN AUSTRALIA WILL
RISE FROM $6.3BN
TO $23BN A YEAR
BY 2050

SUPER GENDER GAP A MAJOR ISSUE

T

he Federal Government has been called on to
address the current inequality that exists for
women in superannuation.
By the time they are 85, women make up 66% of the
population but are 2.5 times more likely than men to
live in poverty in retirement, according to ABS reports.
Accounting and advisory firm William Buck suggested
several initiatives, such as providing a woman’s partner
with the ability to make tax-deductible contributions
to the superannuation account of their wife or partner
while they are on maternity leave, and providing women
returning to the workforce with higher tax-deductible
contribution limits to recover the ground they’ve lost.
Olivia Maragna, co-founder of Aspire Retire, is a
strong advocate of women in super, and said she
would love to see a family contributions cap,
or the ability to carry forward unused
contributions caps.
When asked how the
Opposition would address this
issue, Senator Mathias Cormann
did not agree to implement the
suggestions but said their Paid
Parental Leave scheme would pay
superannuation benefits to help
women’s superannuation balances
while they took time out of the
workforce to care for their newborns.

and agencies, to be better aligned
and coordinated.

THEY RECOMMEND:

Improve coordination of
pre-disaster resilience by
appointing a National Resilience
Advisor and establishing a
Business and Community Advisory
Group: The Advisor would coordinate
and prioritise activity across all levels
of government. The Advisor would
be supported by the creation of a
Business and Community Advisory
Group to leverage knowledge and
expertise.
Commit to long-term annual
consolidated funding for
pre-disaster resilience: The fund
would consolidate current mitigation
spend and centralise new spending
to deliver long-term taxpayer savings.
A $250m fund could deliver $12bn
savings over time.
Identify and prioritise pre-disaster
investment activities that deliver
a positive net impact on future
budget outlays: All mitigation to
be prioritised based on the national
interest and economic benefit as
determined by the cost-benefit ratio
achieved and future budget impact.
A spokesman for the
roundtable said: “Roundtable
members look forward to
working constructively with
governments in the national
interest to prioritise public
policy and funding to improve
Australia’s resilience against
future natural disasters, and
have committed their own
organisations to deliver tangible
outcomes that support this
vital work.”

DID YOU KNOW?

As of December
2012, direct
life insurance
constituted
12% of the
overall risk
insurance
market
Source: Plan for Life

ASIC advises on
planner upskilling

A

s brokers come to grips with heightened
educational requirements, planners are
about to be hit with a new educational impost.
ASIC will introduce two further regimes of additional
training in 2015 and 2019, retaining RG 146 as the ‘base
level’ training standard. The new regimes, B and C,
will apply to new advisers who “change their advice
activities” after completing their initial training.
This could include adding a new area of specialisation,
changing from general advice to personal advice, or
changing from Tier 2 products to Tier 1 products.
Under Regime B, advisers will need an advanced
diploma for Tier 1 products and Certificate IV for Tier 2
products. Regime C will require a Bachelor’s degree for
Tier 1 products and a diploma for Tier 2.
Financial Planning Association (FPA) general
manager of policy and conduct Dante De Gori said
there are three things the FPA would need to consider,
in regard to practical application.
Understanding how existing advisers may get
captured each time the new regime starts is of high
priority for the FPA. “ASIC made it clear that the regime
changes, Regimes B and C, are for new people. But they
also did talk about how it can capture people that are
already in the regime if there are any changes to their
advice, so we just need to work out what that practically
means and what changes they’re talking about,”
De Gori said.
The FPA will also ask ASIC and the Tax Practitioners
Board how the new regimes will interact with the Tax
Agent Services Act, to make sure any duplicate red tape
is removed and new students have a streamlined path to
becoming financial planners. Finally, De Gori said it
was important to check with universities that there
would be sufficient time to deliver the new requirements.

FORUM
26

brokernews.com.au

The value of valuers
Brokers and valuers went head-to-head on the Australian
Broker forums, and it got uncommonly heated

What keeps brokers from leaving
their aggregators?

An MPA survey found some of the reasons brokers are
hesitant to switch aggregators. BJ said the problem
lies with the industry’s representation.

What do
you think?
Leave your
comments at
brokernews.
com.au

Brokers have no voice, no real
control over their business other
than the transactional method
of their business. This in part is
why professional’s i.e. financial
planners, accountants and law
firms find it difficult to embrace
the brokerage industry. Sales,
sales, sales, and completely
transactional by the very nature
of many mortgage brokers.
The restrictive practice
employed by aggregators is
a matter your industry must
address. That is the broker.
One suspects most brokers have
limited understanding of the
power of the combined vote you
have when dealing with your
association! How long before the
limited number of votes being cast
at each AGM further erode your
capacity to effect change.
You operate your business under
the sword of Damocles.
Brokers need to voice their
concern and one way to achieve
the same, is vote at the next MFAA
AGM and remove the board,
appoint competent parties who
will truly represent you and
drag your industry to the level of
professionalism that you not only
deserve but must demand.
BJ on 25/06/2013 1:04PM

A

story on the quality
of Perth valuations
elicited a
massive
response from
readers on both sides of
the argument. Comments
flew in, ranging from
empathetic to downright
abusive, but one thing
everyone appears to
agree on is that there are
definitely some issues to
work through.
Dozens of readers offered
up examples of valuers
undervaluing properties by tens
and, in several cases, hundreds
of thousands of dollars, but not
everyone is convinced the valuers
themselves are to blame.
Steve McClure said he
supported valuers and believed
their unenviable task was
nothing short of a “minefield”.
“They have to predict sales
that result from people’s whims,
problems and a myriad of
unpredictable factors. They are
under pressure from parties with
conflicting interests, urgent
timeframes and the economics
of providing a professional
service at a diminishing fee…
They get no credit when they get
it spot on.”
He is, however, critical of
“undue reliance” on RP Data, and
of lenders themselves.
“By pushing down fees paid to
valuers, lenders are relegating
valuations to tick and flick
reports instead of a professional’s
opinion. I’m also critical of
lenders’ inflexibility in allowing
valuers to revisit reports when
subsequent relevant information
comes to hand.”

BIG FOUR HAVE
BIG PROFITS

But not everyone is so
sympathetic. Gary said the issue
wasn’t limited to Perth.
“Victorian valuers are also
just as incompetent and are more
concerned about protecting their
insurance premiums. I write
approximately $80–90M
annually and am always arguing
with valuers.”
After watching the discussion
take a downward turn, with
insults flung in both directions,
Aussie Franchisee ended the
debate on a high note.
“Given my best friend is a
valuer, we’ve had numerous
discussions around his
responsibilities and requirements.
From my understanding, it
appears to be a relatively difficult
position to be in.
“As a broker, I strongly
disagree with bank and valuer
bashing. In my experience with
valuers, if I’ve got a client whose
transaction is on the cusp of
LMI or falling over and a slight
increase in the fair market value
is all that is required, most
valuers I’ve spoken to have been
happy to amend to make it work.
For this, I thank them as it
correlates with my business
model of ‘customer first’.’’

A study by the Bank for International
Settlements that found that Australia’s
major banks ranked as the world’s most
profitable for the third year running had
brokers dripping with sarcasm.

Steve on 24/6/2013 at 6:23PM
“It is good that the Government
has fostered a competitive banking
environment. Imagine what it would be
like if we had only four major banks.”

Richard on 25/6/2013 at 8:16AM
“That explains where my clawbacks
are going. I am pleased the money isn't
being wasted.”

Jeff on 24/6/2013 at 9:54AM
“Yet commissions have dropped to
brokers by 41% since 2007, due to tough
times for banks?”

ONE YEAR ON
27

brokernews.com.au

ONE YEAR ON

SMSF collaboration
worth the investment

What a difference a year
Richard Chesworth says the
makes … or not. Australian
broker–planner relationship
Broker reflects on the punditry, news and is worth getting right
influential trends that made headlines
pportunities in the self-managed super
12 months ago Australian Broker Issue 9.13

SEQUAL axes CEO
The peak body representing the equity release market last year chose to part
ways with its long-standing CEO, Kevin Conlon. The move had more to do with
the market’s performance than Conlon’s, with the outgoing CEO’s performance
given unmitigated praise by the association’s board. But a dwindling equity
release market meant SEQUAL could no longer employ a full-time chief executive,
according to executive chairman John Thomas.

What’s happened since?

Conlon found a new role in the equity release market, taking over as the general
manager of business and professional development for equity release provider
DomaCom. The company enables property owners to unlock equity in their homes
by allowing investors to purchase partial interest. Conlon called the company’s
products the “second generation” of equity release.

Brokers tip best 2012 bank
MPA’s Brokers on Banks survey last year saw
Commonwealth Bank come out on top for the second
year in a row. The major took the top ranking in six
of the survey’s 10 categories. NAB showed strongly,
moving into second place from fourth overall in 2011.
The bank saw its ranking and overall score increase
by more than any other lender.

What’s happened since?

It was three times lucky this year for CBA, which retained its top spot for the third
year in a row. This time the lender nabbed first place in eight of the 10 categories.
The overall top five saw a shake-up though, with Macquarie and Suncorp making
their way onto the leader boards.

O

fund (SMSF) space is a topic not new to
brokers, but are the opportunities really
being taken advantage of? Richard
Chesworth from Macquarie Bank says
better collaboration between brokers and financial
advisers is a relationship worth investing in.
“It’s a two-way street. First of all, the clients’
needs are fulfilled upon and the experience overall
is a lot better. The client can speak to a planner to
see if it’s suitable – you might find a broker has a
client come in and the transaction may not be
suitable. That broker can’t provide advice, but they
can ask the right questions and in asking the right
questions, if the client can’t answer them in an
appropriate manner, they’ve got the referral
partners to introduce their clients to. Likewise,
if you can display as a broker that you understand
this area, financial planners and accountants have
clients asking for this need to be fulfilled. So, if they
can see that you can fulfil on it, they’ll be delivering
the clients through to you.”
Borrowing to invest using SMSFs is an area with
strict rules of compliance. Chesworth says the need
to upskill can’t be overestimated, and knowledgesharing meetings are a good place to start.
“It’s not an area to cut corners in. It is a specialist
form of lending. So a broker should be upskilling
themselves to understand the key components of
the transaction and to make sure they get that
right. Our focus here is really helping the brokers
through that process, and we’re providing tools in
that basis to assist there.”
A key takeaway for Chesworth is that the stakes
can be high. In some cases, it’s the client’s entire
retirement fund. For this reason, due diligence is
paramount.
“We’re talking about people’s retirement funds
here. And so the upskilling there – we’ve got an
education series or a knowledge series of what we’ve
seen and what we’ve experienced. We’re providing
the tools to help them understand the market
better. So we’ve got everything from the limited
recourse borrowing calculator to other sites,
which is a lot of information for brokers. But the
upskilling’s key. It is a specialist form of lending
and we need to get that right.”

PEOPLE
28

brokernews.com.au

THINKTANK sees brand
refresh in third-party hire
The specialist lender has a new third-party head to coincide
with its new branding

S

pecialist commercial lender Thinktank
has announced the appointment of its
newest senior member and “refreshed
brand identity”.
Thinktank CEO Jonathan Street says
the lender is pleased to welcome Peter Vala into the
newly created role of head of sales and distribution.
“This key appointment has arrived at a
transformative time for our business as we build on
the back of a significant expansion in our funding
lines, as well as the introduction of a number of
key initiatives based around technology, product
development and brand reach.”
Vala comes to Thinktank following six years
as a senior manager and executive at ANZ, where
he held roles ranging from regional industry
specialisation manager to his most recent position
as district executive in business banking. His
experience spans residential, commercial and
development finance, including “highly specialised”
skills in strategic plan implementation.
“Peter’s very strong financial services background
and proven experience working with brokers and
aggregators will be invaluable as he shapes this
high-profile senior position within Thinktank,”
says Street.
“He will be a very visible face and presence for
Thinktank in an exciting and challenging period
ahead. Our executive management team very
much looks forward to working with Peter and, in
particular, benefiting from his industry experience
and contacts in third-party distribution. We are
extremely confident it will prove to be a great and
successful combination.”

FOLLOWING A STRATEGIC
REVIEW OF THE BUSINESS,
WE FELT IT WAS THE RIGHT
TIME TO REFRESH OUR
LOOK AND FEEL
– J ONATHAN STREET
Vala’s appointment also coincides with the launch
of Thinktank’s new branding, seen for the first time
at the recent MFAA 2013 National Convention.
“Following a strategic review of the business, we
felt it was the right time to refresh our look and
feel. We’ve grown significantly since we launched
almost a decade ago, and we wanted an identity that
reflects our leadership position and commitment to
our borrowers and finance partners.”

Broker site takes
out top award

A

ustralian real estate social
networking site Housenet.com.au
has been named one of Australia’s 100
most innovative products or services
in Anthill Magazine’s SMART 100 Index.
Housenet CEO Darren Moffatt says
he’s “thrilled” with the accolade.
“We’ve worked super hard to build
an innovation that helps people get
better results with property, so it’s
great to receive this recognition.”

MEMBERSHIP
IS GROWING FAST,
AND I’M SURE THIS
AWARD WILL HELP
EVEN MORE
– D ARREN MOFFATT

VIC BROKER HONOURED

V

ictorian broker Tracey Pye
was named top Mortgage
Express broker at the Harcourts
National Conference on the Gold
Coast in June.
Pye won the two top awards,
beating 28 other brokers from
across Australia to earn the
title of Top Mortgage Broker
in number of settled mortgage
referrals and number of settled
Harcourts referrals.
“After having been in business
for many years, I’ve learnt the
value of customer service as
well as the rewards from hard
work,” she says. “Being part
of the Mortgage Express team
now means I have support from
other colleagues, access to IT
systems and advertising, and the
feeling of being part of a team. I
am honoured to be the Mortgage
Express Top Broker of the Year
and very proud to be associated
with the Harcourts Group.”
This year’s conference marked
Harcourts’ 125-year anniversary
and had a theme of ‘One team:
Celebrating 125 years’.
“We are proud of Tracey and
what she has achieved. She
is part of a strong network
of mortgage brokers across
Australia who are committed
to achieving the best for their
clients,” says Mortgage Express
CEO Marcus Williams. “The
theme of one team is very
relevant for us as we work
extremely closely with Harcourts
estate agents.”

Moffatt says Housenet aims to be
the ‘base station’ site for homeowners,
investors, residents and first home
buyers.
“We think our custom technology
fills the gap that exists in your digital
world between traditional real estate
portals, property forums and social
media. People use Facebook for
friends and LinkedIn is for your career,
but what about your home? What
site is the base for your property and
online relationships with the locals
where you live or invest? Housenet is
that site.”
He says Housenet members can
connect with other residents and
‘property people’ in their suburbs,
access live market data to find real
estate bargains across Australia, and
manage home improvement projects
using an online renovation tool.
“Membership is growing fast, and
I’m sure this award will help even
more, which is great.”

brokernews.com.au

CAUGHT ON CAMERA

IN FOCUS

P

epper Home Loans recently ran
its Better Business Roadshow,
with its Sydney stop providing
NSW brokers with workshops on
how to put together specialist
deals, as well as communicating
their value proposition to clients.
Photography by Simon Kerslake

View more photos from this event at
brokernews.com.au/industry-events

INSIDER

brokernews.com.au

30

AUSTRALIA’S MOST (AND LEAST)
TRUSTED PROFESSIONS

D

Quirky
co-workers

A

lison Green, aka
blogger Ask a Manager,
recently asked her
readers to submit
descriptions of their
weirdest ever co-workers, from
which she selected her favourite
10 for publication. We had a quick
read and, after quietly thanking
our lucky stars that the worst
thing our office mates do is
‘forget’ their wallet when we go
out for Friday drinks, have
re-published some of the best –
and a few extra for good measure:

THE GUY WHO BALKS AT USING
A BATHROOM

“Instead, he pees into the bushes at the
far end of the parking lot (still in full
view of those with window offices,
those on smoke breaks and others
milling about).”

THE COMPULSIVE LIAR

“We kept a list of crazy things she
said, like one time Bill Clinton tried to
seduce her, another time she was on a
boat with U2 and Elvis Costello and the
boat capsized, and that she was
responsible for inventing a number of
famous products.”

THE PANTS-SHIRKER

“I had a co-worker who noticed people
would go to the restroom and change
into workout clothes before leaving the
building. She decided she’d be okay to
change into her bathing suit with just a
long t-shirt over it and then come back
into the office space to finish filing. She
did it twice before I had to go ask my
manager to talk to co-workers about
wearing pants in the workplace. I wish
you could’ve seen my manager’s face
when I led off with that statement.”

THE BACKSCRATCHER LOVER

“In my first office job, there was a guy
who carried a briefcase every day.
Inside the briefcase was a plastic fork
taped to a pen, and nothing else. He’d
used it as a back scratcher, loudly
proclaiming his pleasure as he shoved
it down the back of his shirt.”

WE KEPT A LIST OF CRAZY
THINGS SHE SAID, LIKE WHEN BILL
CLINTON TRIED TO SEDUCE HER

rumroll please, ladies and gentlemen, as we
announce Australia’s most trusted professions
(according to a Reader’s Digest poll): The top two – firefighters and paramedics – tied (no real surprises there),
but the fact that people generally trust taxi drivers more
than they trust journalists comes with a bit of a sting.
Mortgage brokers failed to make the list, but fellow
financial services professionals, including financial
planners and insurance salespeople, came out less
trustworthy than hairdressers, farmers and flight
attendants – though, thankfully, more so than politicians.

Professions Australians trust

1. Firefighters

2. Paramedics

3. Rescue volunteers
THE KEENER

“At a previous job, a meeting was called
and the team supervisor announced
that a senior team member had just
been let go and that we would discuss
the transition. As soon as the
supervisor had the words out, the
team’s assistant blurted out, ‘I call
his job!’”

The list of 10 inspired us to
have a look at what else the
Internet would turn up in terms
of weird co-workers. The DC
Urban Moms and Dads forum
turned up some crackers,
including the following:
A male in his late 30s with
whom the contributor had been
working with for three years and
who had never been heard to
speak a word. Oh – and he waited
until the end of the day, after
everyone had left the office, to
empty the free candy bowl.
An IT woman who completely
ignored you, even when directly
addressed. The one exception was
if you asked this woman about
the cats that she owned (there
were eight). “She has eight cats
at home and loves to talk about
them. If you can get her talking
about her cats, she’ll actually
help you.”
…And on
DemocraticUnderground.com,
you can read about a secretary in
Southern California who couldn’t
remember whether it was
morning or afternoon.
“She would have to place one
sticky note on the telephone
saying ‘Good morning’ and
another one for ‘Good afternoon’.”